I am an Assistant Professor of Economics at the Graduate School of Economics at the University of Tokyo.

Postdoctoral Research Associate at the University of Cambridge (2021-2022).
Ph.D. in Economics from the University of Pennsylvania (2021).

Field: Macroeconomics and Finance
Contact: hlee [at] e.u-tokyo.ac.jp 


Working papers

Striking While the Iron Is Cold: Fragility after a Surge of Lumpy Investments [appendix] [RePEc]

This paper studies the endogenous state dependence of the aggregate investment dynamics stemming from synchronized lumpy investments at the firm level. I develop a heterogeneous-firm real business cycle model where the semi-elasticities of large and small firms’ investments are matched with the empirical estimates. In the model, following a negative TFP shock, the timings of large firms’ lumpy investments are persistently synchronized due to the low sensitivity to the general equilibrium effect, leading to a surge of lumpy investments. After the surge, TFP-induced recessions are especially severe, and the semi-elasticity of the aggregate investment drops significantly.

Job market paper version: link

Solving DSGE Models Without a Law of Motion: An Ergodicity-Based Method and an Application
[appendix] [slides] [RePEc]

This paper develops a novel method to solve dynamic stochastic general equilibrium models globally and accurately without specifying the law of motion. The method is based on the ergodic theorem: if a simulated path of the aggregate shock is long enough, all the possible equilibrium allocations are realized somewhere on the path. Then, the rationally expected future value function at each period on the path can be completely characterized by identifying the periods with each possible future state realization and by combining the corresponding time-specific value functions. The method provides an accurate solution even for models with highly nonlinear aggregate fluctuations. I apply this method to a heterogeneous-firm business cycle model with the corporate saving glut where the aggregate corporate cash stocks nonlinearly fluctuate. This nonlinearity leads to the state-dependent sensitivity of consumption to a TFP shock through the corporate dividend channel.

Top Income Inequality and the Business Cycle

This paper studies how the pass-through businesses of top income earners affect the aggregate fluctuations in the U.S. economy. I develop a heterogeneous-household real business cycle model with endogenous labor supply and occupational choice and calibrate the model to capture the observed top income inequality. Compared to the counterfactual economy with the factor-income-driven top income inequality, the economy in the baseline model features the aggregate fluctuations that outperform in explaining the recent changes in the business cycle: 1) lower volatility of aggregate output and 2) stronger negative correlation between labor hour and productivity. Heterogeneous labor demand sensitivities to TFP shocks between pass-through businesses and C-corporations build the core of the aggregate dynamics, and the aggregate employment dynamics display substantial nonlinearity due to this heterogeneity.

Disclosure Regulation, Intangible Capital and the Disappearance of Public Firms (with Sara Casella and Sergio Villalvazo) [appendix] [feds working paper] [slides]

Since the mid-1990s, the number of listed firms in the U.S. has halved, and their public disclosure has become opaquer. To explain these trends, we develop a general equilibrium model where the choices of going public or private and the transparency of voluntary disclosure are characterized analytically. In the equilibrium, the stock market with directed search and the private equity market with random search co-exist. Going public with transparent disclosure leads to greater funding at the cost of a firm’s competitiveness through knowledge spillover. According to the estimation, stricter disclosure regulation and increased intangible capital share are the key drivers of the observed patterns. Lastly, we characterize a policymaker’s trade-off between welfare and productivity and analyze the optimal disclosure policy.

Bridging Firm-Level and State-Level Input Elasticities: The Fiscal Multiplier of Infrastructure Investment (with Minsu Chang) [appendix

This paper investigates the fiscal multiplier of infrastructure investment using an estimated heterogeneous-firm general equilibrium model. The analysis centers on a firm-level production function that incorporates the non-rivalrous nature of the public capital stock and its utilization by individual firms. The crucial determinant of the fiscal multiplier through the firm-level investment channel is the elasticity of substitution between private and public capital stocks. We provide both theoretical and quantitative analysis revealing a significant discrepancy between the estimated input elasticities at the firm level and the state level when non-rivalry is considered. The quantitative findings indicate a fiscal multiplier of approximately 1.04 over a 2-year horizon, suggesting a moderate net economic benefit from infrastructure investment. Notably, the implementation of infrastructure investment leads to crowding out of the aggregate investment, primarily driven by the general equilibrium effect.


The Risk-Premium Channel of Uncertainty: Implications for Unemployment and Inflation (with Lukas B. Freund and Pontus Rendahl) [replication codes]
- Forthcoming at Review of Economic Dynamics

This paper studies the role of macroeconomic uncertainty in a search-and-matching framework with risk-averse households. Heightened uncertainty about future productivity reduces current economic activity even in the absence of nominal rigidities. A risk-premium mechanism accounts for this result. As future asset prices become more volatile and covary more positively with aggregate consumption, the risk premium rises in the present. The associated downward pressure on current asset values lowers firm entry, making it harder for workers to find jobs and reducing supply. With nominal rigidities the recession is exacerbated, as a more uncertain future reinforces households’ precautionary behavior, which causes demand to contract. Counterfactual analyses using a calibrated model imply that unemployment would rise by less than half as much absent the risk-premium channel. The presence of this mechanism implies that uncertainty shocks are less deflationary than regular demand shocks, nor can they be fully neutralized by monetary policy.

Work in progress

Rising Intangibles and Technology-Biased Technical Change (with Jesús Fernández-Villaverde

An Analytic Theory of Frictional Firm Dynamics (with Vasco M. Carvalho

Labor Market Impact of M&A and Skill Complementarity (with Minji Bang

From Premia to Spirals: How Financial Frictions Drive Lumpy Investments (with Miguel H. Ferreira and Timo Haber